House prices rise for sixth straight month, but interest rate concerns could slow future growth

House prices rose for the sixth month in a row in September, according to the latest figures from the Office for National Statistics.

The average house price rose 2.9 per cent in the 12 months to September, with the typical house selling for £292,000.

It is believed to have been driven by falling mortgage rates in that period, but concerns about higher inflation and a further rate hike could slow future growth, experts say.

The ONS figures are published late compared to other house price indices, but are considered more accurate because they are based on completed sales.

In September, mortgage rates fell to lows not seen since before Liz Truss’ mini-Budget at the end of 2022, sending markets reeling.

The lowest five-year rate hit 3.68 percent, while the lowest two-year rate fell to 3.82 percent, although these averages have risen again more recently.

Emily Williams, research director at estate agency Savills, said: ‘Growth in September was driven by the easing of mortgage rates.

‘We expect this growth pattern to continue over the next few years. Despite some recent rises in mortgage rates, debt is cheaper than at the start of the year, and the Bank of England is likely to make further base rate cuts next year.

Where did house prices increase the most?

The rate of house price growth varies across the UK.

Prices in Wales only rose 0.4 per cent over the last year, according to the ONS.

Meanwhile, in Scotland prices have risen 5.7 per cent in the 12 months to September, and in Northern Ireland the average house has risen 6.2 per cent.

Prices across England have risen by 2.5 per cent on average – £8,000 more than a year ago. However, a north-south divide persists.

Prices in the Northeast have increased 6.5 percent on average year over year. Whole prices in the North West and Yorkshire and Humber rose by 4.8 per cent and 4.4 per cent respectively.

At the other end of the spectrum, average prices in London are down 0.5 per cent compared to a year ago. In the east of England, average house values ​​have risen by 1.2 per cent and in the south west, prices have risen by just 1 per cent.

What’s next for house prices?

It is difficult to predict what will happen to house prices and where in the country values ​​will rise the most.

Savills predicts the typical house price will increase by 23.4 per cent over the next five years and expects the north to see the greatest growth.

Meanwhile, Hamptons forecasts average prices will rise 12.5 percent on average in the four years from early 2024 to the end of 2027. Hamptons expects prices to rise more in the south in the future.

Potential obstacles to house price growth have emerged in recent weeks. Mortgage rates have been rising and the Bank of England is now likely to lower interest rates more slowly than expected.

Markets have interpreted Rachel Reeves’ budget as inflationary, further exacerbating the feeling that interest rates will remain high for longer.

Today, the ONS also revealed that inflation rose to 2.3 per cent in the 12 months to September, essentially dashing hopes of an interest rate cut by the Bank of England next month.

Additionally, the chancellor increased the stamp duty surcharge for second home buyers from 3 per cent to 5 per cent. This is in addition to the fees normal moving companies already pay.

Many property professionals think this will deter many buy-to-let landlords, small developers and second home buyers from purchasing properties. And when there are fewer buyers in the market, prices are more likely to fall.

The jump in inflation announced today, from 1.7 percent in September to 2.3 percent in October, has dashed any hopes of another interest rate cut by the Bank of England (file image)

North London estate agent Jeremy Leaf said: ‘Whilst the ONS provides the most comprehensive of all price surveys, including cash transactions and mortgages, it reflects the decision-making of buyers and sellers from years ago. least a few months.

‘Since then, on the ground we have had to deal with concerns about the budget and its consequences.

‘The result has been greater caution and more intense negotiation over available properties, despite the recent fall in mortgage rates.

“Concerns remain about the pace of further rate falls and inflation increases, as buyers want to ensure they have a sufficient cushion against a potential rise in costs.”

Rachael Hunnisett, director at lender April Mortgages, added: ‘The tide appears to be turning.

“Mortgage rates are rising again, and inflation has risen back above the Bank of England’s 2 per cent target, casting doubt on the strength of the housing market recovery.

“If interest rates are slow to fall in the coming months, we may see house price increases soften as buyers become more cautious and demand falls.”